Kingspan readies €600m warchest to mitigate Brexit
Building insulation specialist Kingspan is hopeful of making further acquisitions before the end of the year to boost its international scale and help mitigate a slowdown in markets like the UK and Germany.
The Cavan-based company will be looking to boost its scale in its key markets of North America and continental Europe. Chief executive Gene Murtagh said the company's acquisition pipeline is "very healthy" and that management is pursuing specific takeover targets and is hopeful of making progress before the end of the year.
He said Kingspan has "comfortable headroom" in the region of €600m to spend on acquisitions.
After spending €265m on acquisitions in the first half of 2018, Kingspan suffered a takeover "drought" - in Mr Murtagh's own words - during the first half of this year. That was not for the want of trying, however, with the Cavan company missing out on a €700m approach for the insulation division of Beligan company Recticel in May.
Mr Murtagh was speaking on the back of the publication of a strong set of first half financial results in which acquisitions made last year contributed 8% to Kingspan's revenue and trading profit growth.
Overall, Kingspan generated record revenues of €2.2bn in the first six months of this year - a year-on-year improvement of 12%. Trading profit also reached record heights, with an 18% year-on-year jump to €230.4m. Earnings per share were up 16% and the interim dividend for shareholders was raised 8% to 13c per share.However, its share price fell by over 3% on the results.
"We've delivered a record first half, with revenue growth in all our business units and a strong trading profit performance...The near-term outlook is solid, although the political uncertainty in the UK, weakness in sterling, and weaker German economy are amongst risks we are monitoring closely," Mr Murtagh said.
While the UK isn't as large a market for Kingspan as it used to be - contributing around 25% of annual group revenues as opposed to closer to 75% just 10 years ago - the country's pending divorce from the EU, or at least the chronic uncertainty around the means of its exit, remains a live issue for the company.
To a large extent, Kingspan's Brexit mood hasn't changed even with talk of a no-deal exit louder than ever just over a month out from the October 31 deadline for Britain to leave. Mr Murtagh said the final outcome remains "highly uncertain" and "hard to call".
"Things are as uncertain as they were two years ago," he said, adding that Kingspan will be as "agile" as it needs to be in order to cope with the result.
He said he is not contemplating "a catastrophic outcome" as companies will have time to adjust.
Kingspan saw strong growth across each of its product areas - with its key insulated panels division growing revenues by 14% to €1.44bn and profit by 19% to €146.5m. As part of that, UK sales volumes were only down 1%, with the project pipeline there looking "reasonably encouraging".
Brexit uncertainty has hit regular customers, but building and fit-out work related to "Brexit-agnostic" areas like tech and data centres has cushioned the UK slowdown for Kingspan.
The trading environment remains tough in Germany, too, even though the country contributes half the revenues of the UK to Kingspan. Nevertheless, Mr Murtagh said if the slowdown in the German economy were to spread across Europe, it "could be a problem".
Overall, Mr Murtagh said there remains "a lot going right" for Kingspan, with its performances strong in both North and South America and southern Europe and expected to continue.
